Retiree-Only and Excepted Benefits Exemption Remains Under Health Care Reform
On June 14, 2010, the U.S. Departments of the Treasury, Labor, and Health and Human Services released interim final regulations regarding the treatment of grandfathered group health plans under the Patient Protection and Affordable Care Act (PPACA). The preamble to the interim rules clarifies that the pre-PPACA exemption from the group health plan requirements of the Internal Revenue Code (Code), ERISA, and the Public Health Service Act (PHS Act) remains in place for retiree-only health plans and certain excepted benefits. Thus, none of the health care reform benefit mandates apply to retiree-only plans or excepted benefits.
Prior to the passage of the PPACA, the Code, ERISA, and the PHS Act each contained mostly identical provisions pertaining to group health plans. Within those provisions was an exemption for plans that only covered retired employees (and their eligible dependents) and certain excepted benefits, the most important of which are dental and vision benefits that are offered under separate plans. The PPACA removed the exemption for retiree-only plans and certain excepted benefits from the PHS Act, but left those exemptions intact in the Code and ERISA. Because of this discrepancy among these acts, it was unclear whether retiree-only, dental, and vision plans would be exempt from the new PPACA mandates.
The preamble to the interim final regulations clarifies the issue by stating that the exemption for retiree-only plans and excepted benefit plans still applies for those plans subject to the Code and ERISA. With respect to retiree-only and excepted benefit plans subject to the PHS Act — namely, governmental plans and fully insured plans — the federal regulators have adopted a non-enforcement position. In other words, the federal regulators have decided that they will read the PHS Act as if an exemption for retiree-only and excepted benefit plans is still in effect, even though those provisions were removed by the PPACA, and have encouraged state insurance regulators to do the same. Of course, in any given state, it is possible that the state insurance regulators will decide to enforce the PPACA mandates on all fully insured plans. As a result, employers offering fully insured, retiree-only, dental, and vision plans are advised to contact their insurance carriers to determine whether the carrier will or will not amend its insurance policies to comply with the PPACA reforms.
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Harvey A. Kurtz Belinda S. Morgan Isaac J. Morris Greg W. Renz Leigh C. Riley Michael H. Woolever |
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